How to Insure a Car with a Salvage Title

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If you are interested in a car with a salvage title, it may be a bit tricky to find good car insurance. These cars may seem like affordable bargains initially, but most insurers and financers are hesitant to deal with them due to a host of problems they usually bring. Below however you can read a few suggestions on how you may still be able to get decent car insurance for a salvage car.

What is a Salvage Title?

A salvage title is given to a car that was repaired after being declared a "total loss". Total loss happens when a vehicle suffers damage which exceeds a certain percentage of the car's value (when the cost of repairs is more than the actual cash value that the car is worth). The “value percentage” that triggers such a “totaling” varies by state and auto insurer, but it’s typically between 60% and 90% of the car’s resale value. For example, in Oklahoma, the threshold is 60% while in Oregon it’s 80%. It is usually a car insurer that makes the declaration.

Once a vehicle is declared a total loss, it will be issued a salvage certificate, which states that the vehicle cannot be registered, driven or sold in its current condition. After getting the title, insurance companies auction off the vehicle to rebuilders or salvage yards. However, if the car is rebuilt, and passes an inspection (which also varies by state), it will then be issued a salvage title.

Can You Insure a Car with a Salvage Title?

Cars with salvage titles can still be insured, but the process is more difficult. The main issue is when it comes to optional, yet highly important, coverage such as collision and comprehensive. Most insurance companies will write a liability policy for a salvage-title car but are often hesitant to extend a full coverage policy. The primary issue is that assigning an accurate value to a salvage title car is challenging. According to Kelley Blue Book (KBB), a salvage-title car is typically worth 20% to 40% less than one that has a clean title. If you make a comprehensive or collision claim on a salvage car, you should be prepared for a much lower total loss insurance payout for the car from your carrier.

Another issue is the higher risk of safety concerns. Salvage cars often have a series of issues that may not be addressed in the restoration process and can lead to dangers on the road. It is generally estimated that as much as one in every 25 rebuilt cars has a phony airbag installed. It is unfortunate, but repairers often skimp on certain procedures during the restoration in order to boost profitability. Car insurance companies realize the commonality of that situation, and think there can be structural or alignment issues that makes the car more dangerous to drive or more likely to result in accidents. This in turn makes the car more likely to result in an insurance claim and be more expensive for the company to insure.

Nonetheless, with some diligence you still may be able to find full coverage for the car. Below we discuss how you may insure your salvage title car.

How to Get Salvage Title Car Insurance

You are going to need to shop around--a lot--in order to find good insurance for the salvage car. Roughly 20 to 30% of auto insurers will not insure a salvage title vehicle so you will need to shop around. Your first stop should be your current insurer to see if they offer coverage, if not you will have to call agents from all the companies in your area.

Next, you should get a thorough inspection of the car. Most of the top auto insurance companies may require it, but even if they don't, having a local mechanic thoroughly inspect the vehicle can benefit you in the long run. It may prove to the insurance company that the car is in good working order, and they don't have anything to worry about in the car.

Getting a repair estimate--if possible--can also be a great way to help you secure insurance. By getting the original repair estimate from the rebuilder or the insurance company that totaled the car, you give the insurance company peace of mind that all damage has been repaired.

You should also be willing to pay more. Certain auto insurance companies will add a surcharge of up to 20% to the policy when insuring a salvage-title vehicle. This ties into whether it makes sense financially to even get a salvage title car. While you are saving on the initial price, you may end up paying more for the car insurance in the long run, so this is something to keep in mind.

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